New study shows increased premium costs

Without federal funding for cost-sharing, California premium costs could see a steep increase, according to this Covered California study.

Researchers at the University of California, Los Angeles examined the potential impact of the lawsuit initiated by members of the U.S. House of Representatives against Secretary Burwell in 2014. The lawsuit attempted to cut federal funding for cost-sharing reductions, citing a lack of direct authorization for these payments.

Cost-sharing helps to make health care more affordable to lower-income consumers by lowering out-of-pocket costs. Customers who qualify can have the cost of a primary care visit lowered from $45 down to as little as $5.

If federal funding is cut, Silver plan enrollees could see more than a 16 percent increase in costs for premiums, regardless if they received their coverage through Covered California. This increase in premiums could also mean an increase in tax credits required to help customers pay for premiums. This increase in Advance Premium Tax Credits (APTC) would end up costing the federal government $221 million, or 29%, more than what it spends on the current cost-sharing program, without seeing a significant increase in enrollment.

If direct federal funding for cost-sharing reduction (CSR) is dropped, health plans would be required to build the costs of these subsidies into their premiums.

“This report underscores the importance of making policy choices informed by evidence,” Peter Lee, the executive director of Covered California, said. “Here the evidence is clear that changing the payment method for cost-sharing reductions would be a bad deal for the federal government and a bad deal for consumers who do not receive subsidies.”

In June 2016, more than 678,000 consumers were enrolled in a Covered California Silver plan with reduced-cost sharing.

Covered California consumers who are eligible for cost-sharing reductions earn between 138 and 250 percent of the federal poverty line. Lower-income consumers often avoid needed care because of high out-of-pocket costs, which can cost the health care system more in the long run because of the lack of preventative care and early intervention.

While the study only focuses on the financial impact of California enrollees, the court’s decision will likely have broader implications for enrollees across the country.

While the court has ruled in favor of the House of Representatives, there is still a possibility of an appeal.